William Ackman: Everything You Need to Know About Finance and Investing in Under an Hour | Big Think finance 101

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Everything You Need to Know About Finance and Investing in Under an Hour
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Bill Ackman is one of the top investors in the world, and he’s said that he’s aiming to have “one of the greatest investment track records of all time.” As the CEO of Pershing Square Capital Management, the hedge fund he founded, he oversees $19 billion in assets.

But before he became one of the elite, he learned the basics of investing in his early 20s.

This Big Think video is aimed at young professionals just starting out, as well as those who are more experienced but lack a financial background.

Ackman takes viewers through the founding of a lemonade stand to teach the basics, explaining how investors pay for equity, a word interchangeable with “stock.” In the example, the owner starts with $750, with $250 of that coming from a loan.
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WILLIAM ACKMAN:

William Ackman is founder and CEO of Pershing Square Capital Management. Formed in 2003, the hedge-fund has acquired significant shares in companies such as JC Penney, General Growth Properties, Fortune Bands and Kraft Foods. Ackman advocates strategies of “activist investing,” the practice of using stock shares in publicly-traded companies to influence management practices in a way that benefits shareholder interests.
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TRANSCRIPT:

Hi, I’m Bill Ackman. I’m the CEO of Pershing Square Capital Management and I’m here today to talk to you about everything you need to know about finance and investing and I’m going to get it done in an hour and you’ll be ready to go.

How to Start and Grow a Business

So let’s begin. We’re going to go into business together. We’re going to start a company and we’re going to start a lemonade stand and now I don’t have any money today, so I’m going to have to raise money from investors to launch the business. So how am I going to do that? Well I’m going to form a corporation. That is a little filing that you make with the State and you come up with a name for a business. We’ll call it Bill’s Lemonade Stand and we’re going to raise money from outside investors. We need a little money to get started, so we’re going to start our business with 1,000 shares of stock. We just made up that number and we’re going to sell 500 shares more for a $1 each to an investor. The investor is going to put up $500. We’re going to put up the name and the idea. We’re going to have 1,000 shares. He is going to have 500 shares. He is going to own a third of the business for his $500.

So what is our business worth at the start? Well it’s worth $1,500. We have $500 in the bank plus $1,000 because I came up with the idea for the company. Now I’m going to need a little more than $500, so what am I going to do? I’m going to borrow some money. I’m going to borrow from a friend and he’s going to lend me $250 and we’re going to pay him 10% interest a year for that loan.

Now why do we borrow money instead of just selling more stock? Well by borrowing money we keep more of the stock for ourselves, so if the business is successful we’re going to end up with a bigger percentage of the profits.

So now we’re going to take a look at what the business looks like on a piece of paper. We’re going to look at something called a balance sheet and a balance sheet tells you where the company stands, what your assets are, what your liabilities are and what your net worth or shareholder equity is. If you take your assets, in this case we’ve raised $500. We also have what is called goodwill because we’ve said the business—in exchange for the $500 the person who put up the money only got a third of the business. The other two-thirds is owned by us for starting the company. That is $1,000 of goodwill for the business. We borrowed $250. We’re going to owe $250. That is a liability. So we have $500 in cash from selling stock, $250 from raising debt and we owe a $250 loan and we have a corporation that has, and you’ll see on the chart, shareholders’ equity of $1,500, so that’s our starting point.

Now let’s keep moving. What do we need to do to start our company? We need a lemonade stand. That’s going to cost us about $300. That is called a fixed asset. Unlike lemon or sugar or water this is something like a building that you buy and you build it. It wears out over time, but it’s a fixed asset. And then you need some inventory. What do you need to make lemonade? You need sugar. You need water. You need lemons…

Read the full transcript at .

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25 comments

Big Think 13/12/2021 - 4:42 Chiều

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CASH IS KING 13/12/2021 - 4:42 Chiều

Thank you Bill Ackman!

Reply
Datapatch 13/12/2021 - 4:42 Chiều

So many bots 😆

Reply
vijay chacko 13/12/2021 - 4:42 Chiều

Thank you for this video. Have a question – for the expansion in year 2, we will need an additional $300 for the new stand and $200 * 2 to stock inventory at 2 locations, but at the end of the first year we had a loss of $15 and just $250 in hand! So how do we fund the expansion ?

Reply
Mihály Suba 13/12/2021 - 4:42 Chiều

Great, simple, quick. Thank you.

Reply
꧄𒈙𒁏𒀰𒌧𒌧𒈙t𒀱꧄𒀰꧄𒈙꧄𒈙꧄𒈙𒈙𒀰𒀰𒈙꧄꧄𒈙𒁏𒀰𒌧𒌧𒈙t𒀱꧄𒀰꧄𒈙꧄𒈙꧄𒈙𒈙𒀰𒀰𒈙꧄ 13/12/2021 - 4:42 Chiều

this tought me more in 45 minutes than my university taught my in 2 years so far

Reply
Aaron Lowe 13/12/2021 - 4:42 Chiều

2:52 Why did you say $500 in cash and the highlighted text is $750? What am I missing here?

Reply
Michael Kimber 13/12/2021 - 4:42 Chiều

At 5:43, Bill demos a net loss for the lemonade stand. Why is this recorded at $10 and not $15?

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Mike Arguello 13/12/2021 - 4:42 Chiều

Where is the part where you short the market, go on tv and create a panic because of covid and then close out your short positions and make a bunch of money?

Reply
adorablefrenchies 13/12/2021 - 4:42 Chiều

Your voice is so soothing!

Reply
Jimmy Jim 13/12/2021 - 4:42 Chiều

When he talks about the 10% return each year, does he mean you have to sell each year to lock in the 10% and then buy again with 110%? He was talking about compound interest but you can’t gain interest on unrealised profits.

Reply
Georgi Ivanov 13/12/2021 - 4:42 Chiều

Thank you YT algorithm

Reply
Sherrell Sprowls 13/12/2021 - 4:42 Chiều

Nice content. To me, trading the forex and crypto market is way better than any online investment 💯

Reply
MKAY 13/12/2021 - 4:42 Chiều Reply
Jason Joseph 13/12/2021 - 4:42 Chiều

This will be my 3rd viewing of this video.

Reply
Dylan Zeiss 13/12/2021 - 4:42 Chiều

What an amazing intro video on finance

Reply
lauren day 13/12/2021 - 4:42 Chiều

Question 🙋🏻‍♀️ after breakdown of the profit you had $10 before taxes and such. How did you open up other lemonade stands when u have a poor profit margin, yet it didn’t show u borrowed or used your goodwill money 💰 ???

Reply
turu nendin 13/12/2021 - 4:42 Chiều

Almost 99% of the stuff he talked about ,i have already read and engraved on my mind… Still watched the full video with pauses and reviews… Maybe it's the way he explains or maybe i was just curious how a hedge fund manager articulated his thoughts

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Smit Shah 13/12/2021 - 4:42 Chiều

in 7:45 you have showed that he grew his business gradually and constantly. although in the 5th year you've taken 7 stands. if you would have taken 5 stands in the 5th year the revenue wont be able to spark like that. be realistic. In the end it was a fantastic video. I learnt a lot about business by whatching your video.

Reply
Right Angle Triangle 13/12/2021 - 4:42 Chiều

Great video, use it to teach kids about investing.

Reply
vpankaj 13/12/2021 - 4:42 Chiều

Absolute Fun. Thank you for sharing.

Reply
STELLAKATRINA ON TELEGRAM 13/12/2021 - 4:42 Chiều

I make huge profits on my investment since i started
trading with stella katrina, her trading strategies are top notch

Reply
Elena Dulce 13/12/2021 - 4:42 Chiều

I really feel left aside hearing and seeing several testimonies from people on profits they make from crypto/Forex investments. Can someone please recommend a good expert that can trade on my behalf and generate profits for me🥺🥺🥺

Reply
DAMfoxygrampa 13/12/2021 - 4:42 Chiều

Youtube wants me to watch this damn video so badly

Reply
Micheal Jonny 13/12/2021 - 4:42 Chiều

Investing in crypto currency now should be in every wise individuals list, in 2 to 3 years time, you will be stactic the decision you made today

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